Markdown Planning: How to Protect Margins in Clearance Season

Clearance season is a critical time for retailers. While markdowns are necessary to move seasonal inventory and make room for new stock, they can also erode profit margins if not carefully planned and executed. The key to successful markdown planning lies in leveraging data, aligning strategies across channels, and utilizing the right technology, particularly a smart Merchandise Management System (MMS). 

Here’s how retailers can protect margins during markdown season and maximize the value of each clearance cycle. 

1. Start with Data-Driven Forecasting 

Markdowns shouldn’t be based on gut instinct. Retailers need to analyze performance data to understand which items are truly underperforming, what stock levels remain, and how long the product has been on the shelf. 

Using a Merchandise Management System, retailers can access real-time sales velocity, seasonal trends, and location-specific performance to identify markdown candidates and optimize timing. Forecasting demand accurately ensures that markdowns are applied strategically, not reactively. 

2. Segment and Localize Markdown Strategies 

Not every store or channel needs the same markdown plan. A one-size-fits-all discounting approach can result in unnecessary margin loss. Instead, use customer data and inventory insights to segment your strategy based on region, store performance, and even customer demographics. 

With an omnichannel approach, markdowns can also be adjusted based on where inventory sits, whether in stores, online, or in mini-distribution centers (mini-DCs). This flexibility helps avoid excessive discounting across your entire network. 

3. Time Your Markdowns Wisely 

Timing can make or break your clearance strategy. Mark down too soon and you risk cannibalizing full-price sales; wait too long and you could be left with obsolete inventory. 

An intelligent MMS helps automate markdown schedules based on inventory aging, sell-through rates, and promotions, ensuring markdowns happen when they have the highest impact with the least margin sacrifice. 

4. Leverage Omnichannel Visibility 

True omnichannel retailers understand that customers interact with their brand across multiple touchpoints and that inventory should be visible and accessible in real time. Integrating markdown planning across all channels helps optimize stock usage and creates more opportunities for clearance without deep discounts. 

For example, online customers can access marked-down inventory from brick-and-mortar locations, improving sell-through and reducing store-level markdown pressure. 

5. Track Performance and Adapt Quickly 

Clearance season moves fast, and so should your planning. Use your MMS and business intelligence tools to continuously track the performance of markdowns. Are certain price points converting better? Are markdowns moving in-store but not online? 

Real-time performance tracking allows retail teams to adjust pricing, reallocate stock, or increase markdown depth where needed, without losing control of profitability. 

Final Thoughts 

Markdown planning doesn’t have to mean sacrificing profit. With a data-driven strategy powered by a robust Merchandise Management System and executed across a true omnichannel retail model, retailers can protect margins while efficiently clearing inventory. 

As clearance seasons become more competitive and customer expectations rise, it's the retailers who plan smart and move fast, who will win the margin game.